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Bank of America Note On Booking ( BKNG)


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Bullish on BKNG

Note on Booking from Bank of America. Buy, PO $2,950 ( $500 upside)

2Q investment thesis

Booking Holdings (formerly Priceline) is an online travel business offering price disclosed and opaque airline tickets, hotel rooms, rental cars, vacation packages and cruises. BKNG is a leader in the European travel market and has an opportunity to leverage its Booking.combrand and business model to gain traction in North America, Asia and LatAm. It is pursuing a large opportunity in alternative accommodations. It is a top beneficiary of vast vaccine supply increase in Europe by 3Q and see upside from travel/transportation multiple expansion (Expedia, Uber). It could see a similar benefit as ROW data points show an improving travel environment over the next 6-12 months. We also see a valuation disconnect between OTA’s (which should have between 20-35% bookings exposure to Alternative Accommodations, or AA, in 2022), and Airbnb. We think Airbnb’s business deserves a multiple premium to OTAs given AA category share leadership and a broader base of individual hosts, but even when using a 33% discounted P/S multiple to Airbnb, our sum of the parts analysis suggests Booking core OTA businesses is trading at 11x a still depressed 2022 EBITDA. Our PO of $2,950 is based on 25x multiple on 2023 EPS

Market Cap (mn) $$95,434.4

Price $2,329.84

P/Sales (2020)* 13x

% of sell-side rated Buy 40%

Short interest % of float 2% Source: BofA Global Research estimates, Bloomberg

 

Catalysts: 1)

Declining COVID case counts and evidence of European economic reopening and recovery in 2Q driving optimism on favourable operating conditions for Booking and subsequent earnings upside in 2022. We see Booking as a top recovery play given: 1) Big boost in vaccine distribution over next 6 months: Booking should be a top beneficiary of vast vaccine supply increase in Europe beginning in 2Q, with likely greater visibility on economic reopening in 3Q;

2) Growing interest in travel: Our travel data shows growing travel search activity, and Booking has indicated a ramp up in UK/Israel travel activity where vaccines distribution is more widespread;

3) Opportunity for Multiple expansion: Increasing anticipation of a recovery in the US has led to multiple expansion for Expedia and Uber’s stocks (multiple expansion), and we think Booking could show a similar benefit as ROW data points show an improving travel environment over the next 6-12 months;

4) Attractive risk/Reward: based on our upside and downside cases using 2023 estimates when travel is expected to more fully recover.

Latest report: Booking Holdings Inc: Upgrade Booking to Buy as longer- duration play on vaccine rollout 22 March 2021

Risks:

Downside risks are:

1) emergence of potentially vaccine resistant new virus strains or delayed European/ROW recovery due to delayed vaccine rollout or lack of stimulus;

2) Margins disappoint in the near term due to added marketing spend to boost bookings or investments for long-term air/connected trip growth;

3) Direct traffic competition from Airbnb in the Alternative Accommodations space and Google, Expedia & hotels in lodging sector;

4) Internet sector multiple compression driven by shift toward value/cyclical stocks, though we think Booking could still outperform the high- growth Internet group.

Company Description: Booking Holdings (formerly Priceline) is an online travel business.

 

Chart

Currently sitting near the top end of its trading range. Maybe wait for a pull back before getting involved 

BKNG.thumb.png.332f8d7187a7f04eb63d439f3daaaee6.png

Thats all for now folks,

Take Care out there.

 Goodluck with the grind today.

CA

Edited by Courage
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